In March 2021, the House passed the Protecting the Right to Organize (PRO) Act, and it was also included as part of President Biden’s infrastructure package, the American Jobs Plan. Since then, Senate Democrats have failed to secure enough support to bring the PRO Act to a floor vote – but that could change, either by securing more support or abolishing the filibuster.
The PRO Act, if passed, would reshape U.S. labor law in ways not seen in decades. Based on a PBS NewsHour poll of 4,000 respondents, most Americans support unions and about half would join one if given the chance – yet only about 10 percent of American workers actually belong to a union. This gap represents a need for updated labor laws that would be more inclusive of all workers. Union and non-union workers alike as well as nearly every industry would be affected. The construction industry currently maintains about 12 percent union membership, a number that would most certainly rise if the PRO Act were passed.
Union Labor in the U.S.
By way of history, the PRO Act would change and expand upon certain elements of two key U.S. labor laws: the Wagner Act in 1935 and the Taft-Hartley Act of 1947. The National Labor Relations Board (NLRB) was established as part of the Wagner Act and allowed private sector employees to unionize for the first time. The Taft-Hartley Act, by comparison, allowed states to pass their own right-to-work laws – currently, 28 states still maintain right-to-work legislation, including Virginia and North Carolina. Right-to-work is an important factor in unions’ financial stability, as it allows workers to belong to a union without contributing to it financially.
Union membership over the decades has steadily decreased. Since comparable data has been collected in the early 1980s, the number of U.S. workers represented by a union has decreased significantly. In 1983, according to the Bureau of Labor & Statistics, 17.7 million union workers made up 20 percent of American workers. In 2020, 14.3 million union workers made up 10 percent of American workers. Yet, as mentioned above, most Americans approve of unions and almost half would join one if they could. The PRO Act would be a potential solution, allowing millions more Americans the opportunity to unionize.
From the workers’ perspective, the PRO Act would help to achieve pay parity, better benefits, and safer working conditions. It grants more power to unions and disincentivizes employers from attempting to prevent them. For example, the PRO Act would impose steep civil penalties for employers who violate workers’ rights or engage in anti-union discrimination.
Employers and industry leaders take a different stance. Groups like the Associated General Contractors and Associated Builders and Contractors have both taken a stand against the PRO Act, asserting that it would be too costly to implement amid an economic recovery and strip workers of their privacy.
Highlights of the PRO Act
The areas that stand to have the most impact across all industries relate to:
- The definitions of employee, supervisor, and employer;
- Legalizing secondary strikes; and
- Eliminating right-to-work clauses.
Says attorneys Aaron Schlesinger and Lauren Rayner Davis of construction law firm Peckar & Abramson, P.C., “Enactment of the PRO Act would bring about the most significant changes to labor law in the United States since the National Labor Relations Act (NLRA) was passed during the Great Depression era. The PRO Act adds, amends, and rescinds more than fifty provisions of the NLRA, in addition to overturning well settled United States Supreme Court precedent.”
Under current law, only employees are allowed to unionize, and independent contractors are not covered under labor laws at all. The definitions of both employee and independent contractor could change and give more workers access to unions. One piece of the PRO Act would adopt a new, simpler definition of what constitutes employment known as the ABC test. The ABC test would classify workers as employees unless they meet a three-part test:
- The worker is free from control and direction insofar as work performance is concerned
- The worker performs the service outside the employer’s normal course of business, and
- The worker is involved in an independently established trade, occupation, profession, or business as the service(s) performed.
If a worker fails to meet even one of these criteria, he or she would be classified as an employee, not an independent contractor. A version of this law has already been adopted in California.
Secondary strikes, another focal point, would be allowed against third parties and contractors to exert pressure on the primary employer. These are currently illegal because they target secondary or neutral employers, like subcontractors.
Further, 28 states still maintain right-to-work laws, which allow union-represented employees to opt out of paying union dues. The PRO Act would remove states’ ability to impose their own right-to-work laws and allow unions to require represented employees to pay dues for representation – even if an employee has no interest in being part of the union.
Employers would face stronger penalties and fines for getting in the way of unionization efforts, violating labor practices, or punishing employees who participate in union organizing efforts or strikes. One example is to prohibit the permanent replacement of an employee who is on strike – a move that would give unions a clear advantage in stalled negotiations.
Additionally, the PRO Act would change certain aspects of the union election process, like letting employees vote remotely, and update the arbitration process.
The PRO Act’s Impact on Construction
Union membership in construction comprises about 13 percent of all workers, so while it is less than some other industries like utilities or telecommunications, there is substantial room for growth – especially if the PRO Act is passed.
Impact On the Construction Industry
One of the biggest potential impacts to the construction industry would be correctly classifying independent contractors and employees.
If the PRO Act were to pass the Senate as written, it would become more difficult to classify independent contractors as such, especially in construction where primaries routinely work with subcontractors. Subcontractors provide significant value in the construction process, as they allow contractors to supplement their workforce on an as-needed basis or help with short-term needs. Independent contractors, which are often part of the sub’s workforce, aren’t mandated benefits, nor are taxes required to be withheld – another cost savings. Reclassifying independent contractors could have a large impact on costs, depending on the project. There would also be steep fines for failing to communicate employment status to employees.
Another area that would impact construction is the potential change of how a joint employer is defined. Take a contractor with multiple employees on a job site from various subcontractors; contractors need only worry about liability over those who are subject to “essential terms and conditions of another firm’s employee.” The PRO Act would change that and could require contractors to navigate NLRA rules for interactions with all workers on a job site. This would potentially open up additional liability and secondary strikes.
Eliminating right-to-work would also impact construction unions as in other industries. Observations from Construction Dive pointed out that “The elimination of right-to-work laws could mean that open-shop contractors will face a sudden shift in balance to the unions.”
The PRO Act’s future is uncertain; so far, the Senate has refused to take it to vote. However, it’s still likely that pieces of the PRO Act could become law on their own or in different forms. At this point, construction firms and stakeholders should keep an eye on federal legislation and be prepared to respond if and when new laws are passed.
For additional guidance on these and other Construction and Real Estate issues, contact industry team leader and Partner Jennifer French, CPA.
